The Wall Street Journal Agrees with Calcrat

It is always nice to be validated by a major news source, but the themes of our recent article Why You Should NOT Look At Your House As An Investment were retold in a story on the front page of the WSJ Personal Journal section. In Why Your Home Is Not the Investment You Think It Is WSJ writer David Crook goes through the reasons why “houses are not very good investments.”

He did have some interesting bullet points that add some weight to my article. He discusses some fairly heavy downturns in regional housing markets:

• If you bought a house in Los Angeles in 1990, just as the real-estate market turned downward, you would have had to wait a decade for your home’s value to return to what you paid.
• If you bought in Rochester, N.Y., in 1980, you would have seen only a mediocre 4% annual growth for the next 25 years.
• If you bought in Dallas in 1986, as the oil boom went bust, your home wouldn’t have appreciated at all before 1998.

Consider that the next time someone tells you “it will keep going up.” Now, I am not a doomsayer, but I do think that risk should be included in any “investment” decision, especially when it is such a large hunk of one’s overall financial picture.

He also had one other good point that may help some folks get over the shame that goes along with being a lowly renter in our society: “Buying a house with a long-term mortgage is just another form of renting.

Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.”

Exactly right! WSJ – thanks for seeing things our way!

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